How to Start Investing: A Beginner’s Guide to Building Wealth

Investing can feel intimidating, especially if you’re starting with only a small amount of money. But starting small is completely fine—even a single pound can be your entry ticket into the world of investing. This guide will walk you through the essentials, covering why investing matters, how it differs from saving, and step-by-step instructions on how to start investing.

In the UK, people often hold large sums in cash savings. While cash is safe for short-term goals, it has one big drawback: inflation. Inflation is like a slow leak in the value of your money. Over time, even low inflation eats away at your savings. For example, many Brits hold about £1.8 trillion in cash accounts, with around £400 billion in accounts yielding between 0–1%. When inflation is above this rate, your savings actually lose value each year.

By contrast, investing in stocks and funds, especially those that follow broad market indexes, has shown a historical return of about 6.7% after inflation since 1950. Over time, this can help protect your money’s purchasing power and even grow it.

Many people shy away from investing due to fears of risk, seeing it as something akin to gambling. The British public often associates investing with speculative “get-rich-quick” schemes. However, true investing is not about making quick wins—it’s about steady, long-term growth. While individual stocks like Tesla or Amazon are available, a more stable approach for beginners involves investing in funds that track broader markets (like the global stock market) through what are called index funds or ETFs (Exchange-Traded Funds).

With the help of modern investing platforms, you don’t need thousands of pounds to begin. You can start investing with as little as £1 using platforms like Trading 212 or other similar brokers. Here’s a step-by-step guide on how to get started:

Step 1: Choose Your Platform and Set Up an Account

Download a brokerage app such as Trading 212, or choose another UK-based brokerage that allows for small initial investments. Platforms like these are easy to navigate and accessible to beginners. If you’re in the US try Robin Hood or Fidelity, Alternatively you can try one of the many stock trading apps available.

1. Pick an Account Type: For tax efficiency, consider an ISA (Individual Savings Account) if you haven’t maxed out your annual ISA allowance (£20,000 as of this year).
2. Verification: You’ll be asked to verify your identity, provide your income information, and take a selfie for security.
3. Deposit Funds: You can deposit as little as £1 to get started. Be sure to use a free transfer option to avoid any unnecessary fees.

Step 2: Understand Index Funds and ETFs

Index funds and ETFs track the performance of a group of stocks, providing instant diversification. Rather than putting all your money into one company, you spread it across thousands of global companies, which reduces risk.

For example, a popular choice for beginners is a global stock market fund, such as Vanguard’s World Fund. This type of fund includes shares from thousands of companies worldwide, giving you broad exposure to the global economy.

Step 3: Purchase Your First Investment

Once your account is funded, you’re ready to buy:

1. Search for a Fund: In your app, you can search for a global market fund or any other index fund you’re interested in.
2. Choose Amount: Start small; you can invest as little as £1.
3. Purchase: After selecting the amount, confirm the purchase. You’ll now own a small part of a global stock fund.

For beginners, income-paying funds are a good starting point. They provide quarterly payments from the profits of the companies within the fund (dividends). If you don’t want to handle dividends manually, look for accumulation funds, which automatically reinvest dividends, helping your investment grow faster over time.

Investing is not about quick gains. Instead, it’s a long-term journey that requires patience. Stock market values rise and fall daily, and some years may even see negative returns. However, history shows that over time, the market tends to grow, and this growth can work in your favor if you’re patient.

To enjoy the full benefits of investing, avoid withdrawing funds within the first 10 years. This long-term perspective helps you ride out market volatility and increases your chances of seeing meaningful growth.

To someone new to investing the stock table can be a confusing place. Trying to get past the jargon and reading the stock table can be complicated. When you are learning on how to start investing this is vital to learn. Here is a breakdown of the key metrics and what they mean:

Ticker Symbol & Company Name

• The ticker symbol is the unique series of letters assigned to a publicly-traded company, such as AAPL for Apple or GOOGL for Google (Alphabet Inc.). This is then followed by the company name so it is identifiable. It allows you to quickly identify a company on the exchange.

Price (Last Price)

• This is the last traded price of the stock when the market closed for the day. It reflects what investors are currently paying for one share of the company. This price fluctuates constantly when the market is open.

Change (Δ)

• Shows the difference in the stock’s price from the previous closing price, often listed as +/-. Indicates if the stock went up or down since the last market close. For example, +2.50 means the stock is up by $2.50, while -2.50 means it’s down.

% Change

• Expresses the stock’s price change as a percentage. Helps gauge the magnitude of the change relative to the stock’s price. For instance, a 2% change in a stock priced at $100 would be $2.

Open

• The price at which the stock started trading for the day. It’s the initial price that can give insight into the day’s trading activity compared to the closing price of the previous day.

High/Low

• These are the highest and lowest prices at which the stock traded during the day. It shows the day’s trading range, helping to understand how volatile the stock was.

Previous Close

• The stock’s last price at the previous day’s market close. It’s used as a benchmark to see how much the price has changed since the last trading session.

52-Week High/Low

• The highest and lowest prices of the stock over the last 52 weeks (1 year). Helps you see how the stock’s current price compares to its historical performance, giving an idea of its volatility over the long term.

Volume

• The total number of shares traded during the day. High volume often indicates high interest in a stock, whether buying or selling.

Market Capitalization (Market Cap)

• The total market value of the company’s outstanding shares, calculated as Price × Total Shares Outstanding. This gives an idea of the company’s overall size in the market (e.g., small-cap, mid-cap, or large-cap stock).

Price-to-Earnings (P/E) Ratio

• The stock price divided by earnings per share (EPS). Helps to evaluate if the stock is overvalued or undervalued relative to its earnings. A high P/E could indicate high investor expectations, while a low P/E might suggest undervaluation or lower growth expectations.

Dividend Yield

• The annual dividend paid to shareholders as a percentage of the stock price. Shows the return on investment if you hold the stock, particularly useful for income-focused investors.

Earnings Per Share (EPS)

• The company’s profit divided by the number of outstanding shares, this is a key measure of profitability, and a higher EPS generally indicates better profitability.

In the most countries, many people miss out on investing due to a lack of understanding. Schools and government resources rarely teach practical investment skills, leaving most of the population reliant on cash savings. This is why it’s crucial to seek trusted sources for financial education and avoid falling for risky schemes.

A good point when learning on how to start investing is to build your foundation by educating yourself. Some reputable online resources include books, credible financial blogs, and videos created by qualified financial advisors. Many platforms, including Trading 212, offer guides to help you understand the basics of investing.

• Start Small: Even £1 invested regularly can make a difference over time and help you get comfortable with market fluctuations.
• Reinvest Dividends: If you receive dividends, put them back into your investments to help your wealth grow.
• Consider an ISA: An ISA will shelter your investments from taxes, which can maximize your returns.
• Avoid Speculation: Be cautious of speculative trends and “hot stock tips.” Stick to a steady, diversified strategy.

Learning how to start investing is a positive step toward financial independence, allowing your money to grow over time and shielding it from the eroding effects of inflation. By starting now—even with just £1—you’re taking the first step toward building a more secure financial future.